The Uncertainty Principle – Successful Investment in Turbulent Times

Economic uncertainty springs from many sources. Here in the UK, we tend to focus mostly on the outcome of the ongoing Brexit negotiations and how the final deal (or the lack of it) will affect trade, employment, investment and GDP. Step back to look at the global picture are there are plenty of other things to be concerned about, ranging from the possible breakup of Spain through to conflict in the Middle East. Meanwhile, the world – or much of it – is still feeling the impact of the great financial crisis.

Economic uncertainty undoubtedly has an impact on investment decisions. On a macro level, global currency traders reacted to Britain’s decision to leave the European Union by selling off sterling and despite occasional rallies the pound still remains weak against the euro and, to a lesser extent, against the dollar.

In contrast, publicly traded shares have fared rather better in the post-Brexit environment, but there have been losers as well as winners. In general, companies that ring up most of their earnings overseas have tended to see their shares rise, with mining companies doing particularly well. In contrast, concern about the UK’s economic prospects has put pressure on businesses that have a mainly domestic focus. As the Daily Telegraph reported in March of this year, property companies exposed to the UK office block market are among those to have taken a hit.

A Flight to Quality

Arguably one of the trends that has emerged is a flight to quality. That can be seen in the overall progress made by the blue chip FTSE-100, which, exactly a year after Brexit, had rallied by 17% compared with a 14% slump in the value of sterling.

That flight to quality can be seen elsewhere too. For instance, when research company Beauhurst published figures for investment in small companies in the first half of 2017, the data showed a 74% increase. But while the sums of money invested rose sharply, deal numbers fell by about 3.0%. What’s more, the increase in the total invested was inflated by two of the three biggest deals on record. The Beauhurst figures undoubtedly show that investment in early stage companies is holding up. But what they perhaps also reveal is a preference for bigger – and perhaps less risky – investments.

Getting Personal

These are, of course, broad brush strokes and the challenge facing individuals (and institutions) is to make rational and informed investment decisions in the face of some unsettling domestic and global events.

The key to investing successfully is to have a financial plan that sets out what you are seeking to achieve over a period of years, including the required mix of growth and income. It is also important to factor in your personal appetite for risk and how that feeds through to investment strategy.

By having a plan in place, it becomes possible to filter out the background noise and focus instead on the right asset classes, and the degree of exposure to them at any given time.

Given that no two individuals are alike, it is equally important to work with wealth managers who can tailor a service that is bespoke and responsive to any changes in the market or the requirements of the investor.

Member Focused

The Route – City wealth club sets out provide just such a bespoke service. Unlike the majority of wealth managers, The Route operates on a Membership basis. This is more than a nominal difference. By focusing on the exclusive requirements of a relatively concentrated group of Members, The Route can not only offer individually tailored advice and investments, but also opportunities that are not available elsewhere. For example, members have access to exclusive property investment deals.

Each member receives at least two personal financial reviews every year and there are opportunities to invest in business loans to qualifying firms, as well as invest in a range of assets, including property. Advice on tax efficient investments is a key part of the service.

The investment goals of individuals do not necessarily change because of economic uncertainty but as markets move, the route to achieving those objectives should be kept under review. The Route – City wealth club offers members a means to pursue their targets, even when when the outlook is unclear.